Are you looking for top-notch investment management firms in the Washington, DC – Northern Virginia – Maryland area? Maybe you have an old 401(k) from a previous job and you’d like it to be invested professionally? Or perhaps you now have healthy monthly disposable income and would like to invest your extra money and maximize your savings?
There are a lot of wealth management firms in the area from which to choose, and it can be overwhelming. They have different investment philosophies, various designations, and different fee structures. If you are unsure of where to start, you can breathe and relax, as we have done the research for you. In this blog, we share what we believe are the top 5 investment management firms in the Washington, DC area.
How did we select the 5 best Investment Management firms in Washington, DC?
We developed a robust set of criteria that we believe a top-notch investment management firms in Washington, DC should have.
- They are a fiduciary. This is non-negotiable. A fiduciary acts in your best interest and is required to put their clients’ interests ahead of their own. In contrast, non-fiduciary advisors are not required to recommend what’s best, as long as it’s “suitable.” Investment advisors registered with the SEC or a state securities regulator are fiduciaries.
- Firm’s Principal has at least 10 years in the investment profession. When it comes to investment management, you’ll benefit substantially from working with an investment advisor who has experienced both stock market booms and busts and has learned how to position investment portfolios accordingly.
- Has a CFA® designation. The Chartered Financial Analyst® designation is one of the highest distinctions in the investment management profession. A CFA professional will have a strong understanding of various asset classes and would be better suited to deliver top-notch asset management services.
We gave bonus points to investment management firms that:
- Have a diverse team. Forward-looking wealth management firms will have a diverse team.
- Have fees of 1% or less. The average investment management fees for account sizes below $1,000,000 are just above 1% (specifically, 1.05% to 1.18%). If you can get top-notch investment management service for the average price, why not.
What are the 5 best Investment Management firms in Washington, DC?
Here are the best investment management firms in DC, arranged in no particular order. Note that this is not an exhaustive list of local investment management firms and it reflects my personal opinion per our criteria above.
1. Hemington Wealth Management – Falls Church, VA
Hemington believes in diversification across multiple asset classes and does not employ timing strategies.
They have a $1 million account size minimum, with fees ranging from 1.25%, down to 0.25% for larger accounts.
As of December 31, 2020, Hemington provided investment management services to approximately $756 million in client assets.
2. Altius Financial Advisors – Bethesda, MD
Altius is also a fee-only financial planning firm, and prefers to create a financial plan for clients first before managing their portfolio.
Altius primarily uses low-cost passive mutual funds or ETFs, supplemented by a “satellite” portfolio of actively managed mutual funds.
They have a $500,000 minimum account size, with fees starting at 1%, down to 0.4% for larger accounts.
As of December 31, 2020, Altius managed about $87 million in assets for 59 clients.
3. Garnet Group – Bethesda, MD
Garnet believes in building broadly diversified portfolios.
Their investment management fee is 1% of assets, with a $12,000 minimum annual fee. This results in an effective minimum account size of $1.2 million, if you prefer to keep your fees at 1%.
As of December 31, 2020, Garnet Group had approximately $139 million in assets under management.
4. Farr, Miller & Washington – Washington, DC
FMW primarily buys individual securities to create a portfolio. They do have a “Wealth Builder” portfolio that buy model ETFs.
Their investment management fees range from 1% to 0.75%, with a $5,000 minimum annual fee. This creates a de-facto minimum account size of $500,000, if you’d like to keep your fees at 1%.
As of December 31, 2020, FMW was actively managing $1.87 billion in clients assets via their asset management services.
5. Glassman Wealth Services – Vienna, VA
Glassman employs both fundamental and technical analyses in creating an investment portfolio.
They require a $2,000,000 minimum asset level and a $16,000 minimum annual fee. Fees range from 1.25% down to 0.25% for larger accounts.
As of December 31, 2020, GWS had about $1.6 billion in assets via their investment management services.
How is District Capital different from other Investment Management firms in Washington, DC?
District Capital is an investment management firm headquartered in Washington, DC. We are similar to the 5 top-notch firms above in that we are a fiduciary – we act in our client’s best interest and do not get commissions. Two of our principals have CFA designations and the co-founder has been in the investment management profession since 2004.
We stand out from other investment management firms in DC in the following ways:
- We cater to DC professionals in their 30s and 40s. While most investment management firms target retirees and near-retirees, we believe we can make a bigger impact by working with professionals while they are in their wealth-building phase.
- We do not have account minimums. This is in contrast to most wealth management firms in DC, who require at least $1 million or $2 million in assets. We believe this steep requirement shuts out most 30s and 40s professionals who are still building their wealth. We created District Capital to fill an unmet need – to serve and provide young/mid-career professionals with top-notch financial planning and investment management services.
- We are well-versed in socially responsible funds. More Millennials and Gen X professionals want to align their values with their money. There is a strong desire to help address climate change and promote socially responsible practices in companies, and reflect those in their investment portfolios. But you may wonder, will financial returns be sacrificed for “doing good?” Several major studies disprove this myth.
In 2021, the Morgan Stanley Institute for Sustainable Investing released a study showing that in a year of extreme volatility and recession (2020), funds focused on environmental, social, and governance factors, across both stocks and bonds, weathered the year better than non-ESG portfolios. In 2019, Morgan Stanley published a study using data from 2004 to 2018 and showed that there is “no financial trade-off in the returns of sustainable funds compared to traditional funds, and they demonstrate lower downside risk.”
This is something that personally resonates with me, given my previous work and continued passion in social and environmental justice.
How much do Investment Management services in Washington, DC cost?
The average investment management fees for account sizes below $1,000,000 are about 1% of assets under management. District Capital and three of our top 5 investment management firms listed above charge 1% or below, while two start at 1.25%.
If you meet a certain level of assets, the wealth management fee will usually include receiving ongoing comprehensive financial planning advice.
Why not go with a robo investment advisor?
Robo advisors like Betterment and Wealthfront charge 0.25%, which is a fraction of the traditional investment management fees. But you get what you pay for. The service you are receiving is strictly limited to the investments under their platform. You won’t have access to a CFP® or CFA® professional.
Some robo advisors have a high-tier plan that will give you access to a CFP® professional. Betterment charges 0.40% for this. This fee includes investment advice for your 401(k) held outside Betterment.
Big picture-wise, you’re not getting comprehensive financial planning advice from a robo investment advisor. They won’t really try to get to know who you are and what’s important to you. They won’t create a written financial plan that will give you advice on all aspects of your money: cash, credit & debt management, insurance planning, estate planning. They likely won’t be able to help you decide whether or not it’ll be good to buy a bigger home or a vacation home, or whether it’s wise to accept a new job offer.
Robo advisers cannot help you in many of your major financial decisions. You may want to keep your search within holistic investment management firms.
What other questions should you ask a potential Investment Management firm?
In addition to asking their designations and experience, ask the following three questions, when interviewing prospective wealth management firms in DC:
Do you buy individual stocks, or primarily use mutual funds or ETFs?
Buying a select number of stocks that outperform the broad market might seem sensible for an investment advisory firm to do. But picking the right stocks requires an immense amount of work that a wealth management firm is usually not best suited to do (as opposed to a mutual fund with specialized team members). More importantly, year after year, data has shown that stock pickers underperform their benchmarks.
Studies have shown that the biggest differentiating factor in portfolio returns is not stock selection but asset allocation. In 2000 Ibbotson and Kaplan published a study titled “Does Asset Allocation Policy Explain 40, 90 or 100 Percent of Performance?” They found that 40% of the return variation between funds is due to asset allocation, with the balance due to other factors, including asset-class timing, style within asset classes, security selection, and fees.
You’ll want a DC investment management firm that knows how to analyze not individual stocks, but the potential future returns of various asset classes. These may include: U.S. large growth stocks, U.S. large value stocks, small and mid-sized U.S. companies, developed markets stocks (stocks in Europe, Japan, Australia), emerging market stocks (companies in China, India, and other emerging markets), U.S. core bonds, U.S. inflation-linked bonds, U.S. municipal bonds, emerging market bonds, high yield bonds, and alternative asset classes.
You can invest in these asset classes using mutual funds or ETFs.
Do you use low-cost index funds, or higher-fee actively managed funds?
We are big fans of low-cost index funds, but we also believe there can be a place for actively managed mutual funds.
Why use low-cost index funds? In 2015, the White House Council of Economic Advisers released a report that showed that hidden fund fees lead to about $17 billion of losses every year for working and middle-class families.
In addition, more than three-quarters of active funds that invest in large U.S. companies consistently lag the S&P 500 Index, while charging higher fees!
Why use active funds? Some thought leaders point out that most of these underperforming active funds lag the market because they are really “closet index funds” that charge higher fees. This means these funds own too many stocks in their portfolio, which just mimics the index, while charging higher fees. A well-researched concentrated portfolio of 40 to 50 stocks may have the potential to beat an index fund.
A top-notch DC investment management firm will be able to articulate the pros and cons of buying index funds and active funds.
Did you rebalance client portfolios during the significant stock market downturn in March of 2020?
The U.S. stock market fell sharply by 30% in March 2020, when the world was gripped by COVID-19. Since then, the market has significantly recovered, long before the vaccines were created and distributed widely. A disciplined wealth management firm would have a strict rebalancing criteria, which will usually result in buying stocks during market downturns, regardless of how scary the headlines are.
Work with District Capital for your Investment Management needs
If you’re in your 30s and 40s living in the DMV area and are looking for top-notch investment management services, consider working with District Capital. We can manage and optimize your old 401(k), IRA, or taxable brokerage accounts. We can create a tax-efficient, customized portfolio to help you reach your goals. You will benefit from our strong investment team with a robust background in the investing industry.
If any of this resonates with you, schedule a free discovery call with one of our investment advisors, today!
If you’re not ready to work with an advisor just yet but would like to continue learning about investing, check out our finance blog and YouTube channel. We share practical tips on investing and personal finance. Some videos that may interest you include: fossil fuel free investing, how to do a backdoor Roth IRA, and Fidelity index fund investing for beginners
Alvin Carlos, CFP®, CFA is an investment advisor and fee-only financial planner, in Washington, D.C that works with clients across the country. He has a Master’s degree in International Relations from SAIS-Johns Hopkins. Alvin is a partner of District Capital, a financial planning firm designed to help professionals in their 30s and 40s achieve their financial goals through smart investing, reducing taxes, retirement planning, and maximizing their money. Schedule a free discovery call to learn how we can help elevate your finances.
